Geopolitics is increasingly putting the economy at risk, with US data losing momentum, inflation risks skewed to the upside, and rising policy uncertainty around the Fed and upcoming mid-term elections.
Energy disruptions remain central to the outlook, with risks of stagflation or recession if shocks persist, while private debt vulnerabilities are starting to build beneath the surface.
Equity positioning shifts tactically toward the US over Europe, alongside a rotation into risk-on sectors and relatively cheaper opportunities, particularly software over expensive semiconductors.
We maintain a focus on relative value strategies (backed by our proprietary Quantitative Edge model) and key themes including China AI challengers, the quiet rotation into real assets, and methane and energy security, while keeping a constructive base case for equities, with targets of MSCI USA at 7,200 and Euro STOXX 50 at 6,000.